Crosspoint Ventures' Neiman sees e-business opportunities

lsomech@oscargruss.com

SAN FRANCISCO (CBS.MW) -- Don't you wish you had come to California in the late 1970s when the world of computers and integrated circuits was exploding?

Back then, hundreds of young college graduates -- many of them armed with just a liberal arts degree -- "discovered" Silicon Valley. Many of these kids are now in their 40s and 50s.

Some of them are venture capitalists. Others are founders of very successful semiconductor companies. Many of them are rich. OK, OK, so some are waiting tables.

Seth Neiman at Crosspoint Venture Partners remembers those days. He was a serial entrepreneur back then, starting companies, then selling them to Sun Microsystems
"
and other technology players.

Forbes Magazine recently named Crosspoint Venture Partners of Menlo Park, Calif., the No. 1 venture capital firm in the world based on public market returns during the past three years. For every $1,000 Cross Point sank into a private company, an IPO gave Crosspoint a 565 percent return. See the figures.

Investments in Brocade Communications, Juniper Networks and Foundry Networks alone have resulted in $43 billion in market capitalization. Brocade was the third-best performing IPO in the U.S. stock market in 1999.

Neiman helped build a number of start-ups, including Dahlgren Systems. He joined Maxitron, a big factory automation business, "when General Motors thought factory automation was going to take over the world."

Neiman was also a founder of Brocade Communications and in late 1995 became a general partner for 30-year-old Crosspoint.

So what's next?

Neiman says the big driver in e-business will come from companies that do for the front office and customer satisfaction what Brocade and Foundry did for the back office.

You see, the Internet is virtualizing companies left and right. And every step in the movement of commerce to the Internet has a dozen opportunities in it.

Large companies are moving services, software, databases, everything -- outside the corporation. And when you do that, you create vertical opportunities.

"Venture capital and the public markets are being asked to play a very special role. The way you get to be part of the top five is to lead in the reinvention of major industries. Crosspoint's role has been to focus on where tech has been an absolutely destructive force. Brocade is a good example, and so are Ariba and Covad," he said.

Venture capitalists these days are awash in capital, and their returns, thanks to an eager U.S. stock market for technology IPOs, are soaring.

"Our strategy has been logical," says Neiman. "We have gone from equipment companies to local area networks to wide area networks to network operators to broadband. And right now the most interesting and exciting thing is where you have a company riding on top of a network, deploying the network for different purposes."

E-Convergent is one private company -- based in California -- that Crosspoint Ventures is backing. It provides professional services using its own technology, which it hands off to its customers' employees.

Service companies that deploy their customers' networks and then deliver software, customer service, human resources, marketing and other functions are among the hottest of the Internet infrastructure stocks on Nasdaq.

"So we have the virtualizing of these companies and the movement of commerce to the Internet. Every step has a dozen opportunities in it, and they are huge," he says.

"Three years ago no one would outsource mission critical enterprise. Now no one runs their own hosting service. So people said, 'What else can we move outside the corporation?' And when you do that, you create vertical companies, vertical opportunities," he said.

Sounds like the best of a virtual world.

Tel Aviv: Oscar Gruss & Co., probably the most active market maker of Israeli companies' shares that trade on Nasdaq, will hold its yearly one-day telecommunications conference next week. The Sunday show in Tel Aviv will feature presentations from software, Internet and telecom companies Terayon, Orckit, Radware Ltd., Nice Systems and Arel Communications, among others. Most Israeli companies' shares have come alive this year and last.

One newly formed gauge, the AMIDEX35 Index of Israel's 35 largest publicly held companies, doubled in value in its first 13 months through mid-January. The index, which has a mutual fund attached to it, tracks companies that trade on Nasdaq, the NYSE and the Tel Aviv Stock Exchange. It's up 32 percent since the start of this year.

At this coming Sunday's session, I'll be chatting about Israeli companies and the financial respect -- or lack of it -- they get. You can e-mail lsomech@oscargruss.com if you want more information on the event.

New show: Our new early-morning television show, a look-ahead at Wall Street, shows each weekday morning on WCBS-TV in New York City. It's hosted by our own CBS MarketWatch anchor Betsy Karetnick and by WCBS anchor Amanda Grove. Plus, watch "CBS MarketWatch Weekend" across the United States every weekend.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.